Does your nonprofit have the auto insurance coverage it needs?
Does your nonprofit depend on volunteers or employees who drive as part of their duties? Then your organization needs auto insurance coverage. Without it, a single accident that involves a volunteer or staff member could lead to expenses that cripple your organization.
When it comes to auto insurance, nonprofits face unique challenges. For example, volunteers might be called on to transport children, older adults and other vulnerable clients. In addition, volunteer drivers might have to navigate unfamiliar neighborhoods while driving cars they don’t own. These factors create a set of risks that can only be managed with adequate insurance coverage.
To gain peace of mind, work with an insurance agent or broker who specializes in underwriting nonprofit organizations. While every nonprofit has its own set of needs, here are some essential points to cover when you discuss auto insurance.
Get hired auto and nonowned auto liability
If you ever ask volunteers to drive rented or leased cars on behalf of your organization, you need coverage for hired auto liability. If volunteers drive their own cars, then non-owned auto liability is also essential. These two coverages are often packaged together in a single policy, or as an endorsement to a general liability policy.
Some nonprofit managers skip hired and non-owned policies. They assume that a volunteer’s personal auto liability insurance will pick up the tab for driving accidents. Unfortunately, that’s not true. Personal coverage does not apply if an accident victim chooses to sue your organization.
In addition, you might discover that volunteers have no personal auto insurance — or that they don’t have enough to cover the costs of an accident. Hired and non-owned coverages are designed to fill these gaps.
Consider commercial auto coverage
If your nonprofit owns vehicles, then you need a commercial (or business) automobile policy. This provides coverage when an employee, volunteer or anyone else has an accident while driving on of the organization's vehicles.
Costs for this coverage vary depending on location and type of vehicle. Premiums are higher for vehicles that are garaged in larger cities. Trucks and vans usually cost more than cars.
Get adequate coverage for your nonprofit
Many brokers recommend that nonprofits buy at least $1,000,000 of auto liability coverage. Some nonprofits get extra protection with an umbrella policy that provides coverage above the limits of their primary insurance policies.
Consider endorsements to extend your auto coverage
An endorsement is an amendment to a standard insurance policy that adds or removes coverage. Endorsements allow you to fine tune coverages to meet your organization’s needs. You might find two endorsements to your auto insurance to be especially useful:
- One is an endorsement to cover physical damage to volunteer- and employee-owned vehicles.
- The other is volunteer excess auto liability, which provides up to $500,000 of coverage beyond the liability limits of a volunteer’s personal auto insurance. This offers extra protection for volunteers whose personal assets would otherwise be drained by the cost of a serious accident.
Read policies carefully
Okay, so reading insurance policies isn’t your idea of a good time. Fair enough. But what if you discover a gap in coverage that could cost your organization thousands of dollars in the future? In that case, the time you devote to reviewing your policies is well spent.
Look for any language in your auto insurance policies that’s vague or confusing. List your questions and take them to your organization’s agent or broker.
Of particular concern to nonprofits is a “failure to provide insurance” exclusion. This clause allows an insurer to deny coverage by arguing that your organization does not have enough coverage in place. What constitutes “enough”? That might be buried in fine print or left to the insurer to decide. Avoid this exclusion.
Put risk management in place
Having adequate auto insurance makes it easier for your nonprofit to recruit employees and volunteers whose job descriptions include driving. And yet insurance is only part of the solution. The other major piece is risk management — taking steps to prevent accidents from ever happening in the first place. For example:
- Check driver safety records by ordering motoring vehicle reports for your staff and volunteers who drive as part of their assignments.
- Ask staff and volunteers to provide proof of personal insurance coverage with liability limits of at least $100,000/$300,000 — up to $100,000 for losses by one person and up to $300,000 for losses by additional people.
- Train volunteers and employees in basic car safety, including no use of a cell phone while driving.
Review your coverage annually
As your programs and services change over time, so will your insurance needs. Meet with your agent or broker at least once a year to review your organization’s auto policies. Think about all the different ways that people drive vehicles on behalf of your nonprofit and make sure that your bases are covered.
Blue Avocado: A board member's guide to nonprofit insurance by Pamela Davis (2008)
CIMA Volunteers Insurance: Insurance basics for nonprofit organizations (2012)
Insureon: Certainty in uncertain times: a nonprofit’s guide to risk management and small business insurance (2014)